ING Wins More Time From EU to Sell Its Insurance Business

By Aoife White and Maud van Gaal -
Nov 19, 2012

ING Groep NV (INGA), the biggest Dutch
financial-services company, won more time from European Union
regulators to sell its insurance operations and pledged to repay
state support by 2015. The shares rose.

The European Commission said today that it extended the
deadline for ING to divest the businesses, originally set for
the end of 2013, because of current market conditions. ING said
today that the new timeline means it must sell more than half of
its insurance arm in Europe by the end of 2015 and dispose of
the rest by the end of 2018.

“It’s good news,” said Corne Aben, an Amsterdam-based
fund manager at Optimix Vermogensbeheer NV, which manages about
1 billion euros ($1.3 billion), including ING shares. “That
increases flexibility, which means they’ll be able to get better
prices for the units they want to sell.”

EU regulators were forced to re-examine the terms of ING’s
rescue by the Dutch government after the company won a court
challenge that overturned their 2009 decision. ING sought to
change the original plan as Europe’s debt crisis worsened and
regulations became tougher, disrupting markets and making it
harder to sell assets.

ING said it agreed to sell more than 50 percent of its
Asian insurance and investment-management operations by the end
of next year, and dispose of the rest by the end of 2016. It
must divest at least 25 percent of its U.S. arm by the end of
2013, more than half by the end of 2014 and the rest by 2016.

Shares Rise

The Brussels-based regulator also approved ING’s plan to
create a new Dutch retail bank and extended a ban on the company
making acquisitions or undercutting rivals on price at its ING
Direct Europe unit.

Chief Executive Officer Jan Hommen said on a conference
call that it’s not in shareholders’ interest to pay a dividend
yet, and that “many priorities” must come first, including
repaying the Dutch state and bolstering capital levels.

“It’s important that they now can avoid forced sales at
lower prices,” Optimix’s Aben said. “So much money is
concerned with these asset sales. To me, that outweighs the fact
that the restructuring, and possibly dividend resumptions, will
take longer.”

European IPO

ING plans to sell the European insurance assets through an
initial public offering, the company said. It filed for a share
sale of its U.S. division on Nov. 9.

ING will combine the commercial operations of
WestlandUtrecht Bank, which has 36.4 billion euros of Dutch
mortgages, with the retail banking activities of its Nationale-
Nederlanden insurance unit. Stricter capital requirements had
scared off potential buyers as ING sought to comply with
previous EU orders to sell WestlandUtrecht.

The combination will create a new retail lender that the EU
said would ensure competition in the concentrated Dutch market.
The new Nationale-Nederlanden Bank will get 2.6 billion euros in
WestlandUtrecht Bank mortgages, while the other 33.8 billion
euros will be retained in a separate unit at ING Bank. ING said
the reorganization will cause “a number of redundancies.”

Keeping Mortgages

“It’s good to hear” that ING won’t have to sell
WestlandUtrecht, while keeping so much of the mortgage book
“prevents a large divestment loss,” said Cor Kluis, an
Utrecht, Netherlands-based analyst at Rabobank International.

ING received a 10 billion-euro bailout by the Dutch state,
triggered as subprime mortgage assets held at its U.S. unit
plunged. It has returned 7 billion euros, with 2 billion euros
in interest and premiums, to date.

“We are pleased that the agreement announced today gives
us more time and flexibility to complete the required
restructuring, while leaving our strategic objectives
unchanged,” Hommen said in the statement.

ING will withdraw its appeal of the Commission’s earlier
decision at the EU General Court in Luxembourg, Hommen said
today, while the Commission will continue its appeal against the
Luxembourg court ruling of March 2012 for “principal legal
reasons.” The outcome won’t change today’s agreement, ING said.

EU governments spent 1.6 trillion euros to shore up banks
from 2008 to 2010 amid the crisis that followed the collapse of
Lehman Brothers Holdings Inc. The EU must approve large state
subsidies and can impose conditions on any aid given.

Dutch Bailout

Among other disposals scuppered by the financial crisis,
Royal Bank of Scotland Group Plc may seek more time from EU
regulators to sell 316 U.K. branches after Banco Santander SA (SAN)
abandoned its planned 1.7 billion-pound ($2.7 billion) purchase
on Oct. 12. RBS was required to sell the outlets by 2014 as an
EU condition of its British bailout.

ING said it will repay the Dutch government 3 billion euros
in state aid with a 50 percent premium, starting with the first
payment of 1.125 billion euros on Nov. 26. It will make three
more payments in November 2013, March 2014 and May 2015, and may
speed up repayments “if possible and prudent under the
prevailing economic circumstances.” After the final repayment,
the Netherlands will make a return of 12.5 percent on its
investment, ING said.

“The agreement ensures that the taxpayer is rewarded
appropriately for the support he has given,” Dutch Finance
Minister Jeroen Dijsselbloem said in a letter today.